Financial Instruments and Territorial Cohesion
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Financial Instruments and Territorial Cohesion Mellersta Norrland/Sweden Case Study Report 30/08/2019 This applied research activity is conducted within the framework of the ESPON 2020 Cooperation Programme, partly financed by the European Regional Development Fund. The ESPON EGTC is the Single Beneficiary of the ESPON 2020 Cooperation Programme. The Single Operation within the programme is implemented by the ESPON EGTC and co-financed by the European Regional Development Fund, the EU Member States and Partner States, Iceland, Liechtenstein, Norway and Switzerland. This delivery does not necessarily reflect the opinion of the members of the ESPON 2020 Monitoring Committee. Authors Viktor Salenius, Nordregio (Sweden) John Moodie, Nordregio (Sweden) Kaisa Granqvist, Aalto University (Finland) Advisory Group Project Support Team: Cristina Wallez Cuevas, General Commission for Territorial Equality, France; Adriana May, Lombardia Region, Italy; Joerg Lackenbauer, European Commission ESPON EGTC: Zintis Hermansons (Project expert) and Akos Szabo (Financial expert). Acknowledgements We would like to thank Jörgen Larsson, CEO of Inlandsinnovation (formerly Mittkapital); Eva Nordlander, CEO of Almi Invest in Mellersta Norrland; Lars Karbin, Chairman of the Board of Startkapital I Norr AB; Mattias Lööv, CEO of H1 Communication AB; Tobias Sjölander, CEO of Loxysoft AB, for taking the time to offer their useful thoughts, ideas and insights on the Swedish financial instruments ecosystem. Information on ESPON and its projects can be found on www.espon.eu. The website provides the possibility to download and examine the most recent documents produced by finalised and ongoing ESPON projects. This delivery exists only in an electronic version. © ESPON, 2019 Printing, reproduction or quotation is authorised provided the source is acknowledged and a copy is forwarded to the ESPON EGTC in Luxembourg. Contact: [email protected] ISBN 978-99959-55-97-7 Financial Instruments and Territorial Cohesion Table of Contents List of Tables ............................................................................................................................... i Abbreviations .............................................................................................................................. ii Abstract ...................................................................................................................................... 1 1 Background ....................................................................................................................... 2 1.1 Economic and regional context ................................................................................. 2 1.2 Summary background to the FI ................................................................................. 2 1.3 Scope and objectives of the FI .................................................................................. 2 1.4 Operational issues .................................................................................................... 3 1.5 Implementation issues .............................................................................................. 3 1.6 Scale and budget ...................................................................................................... 4 1.7 Existing evaluation results ......................................................................................... 4 2 Main results and findings ................................................................................................... 6 2.1 Impact of the Financial Instrument ............................................................................ 6 2.2 Value added of the Financial Instrument ................................................................ 10 2.3 Territorial dimensions of the Financial Instrument .................................................. 12 2.4 Governance dimensions of the Financial Instrument .............................................. 13 2.5 Strengths, weaknesses, opportunities and threats (SWOT) ................................... 14 2.6 Typical or flagship projects ...................................................................................... 16 2.7 Overall assessment ................................................................................................. 16 References .............................................................................................................................. 17 List of Annexes .......................................................................................................................... 1 Annex 1: CS elaboration process ...................................................................................... 2 Annex 2: Flagship projects ................................................................................................ 3 List of Tables Table 2-1: Table: Output and result indicator data for the two co-inveastment funds active in Mellersta Norrland. Programme period 2007-2013, situation at fund closure on 31.3.2017..... 7 Table 2-2: Comprehensive FI Assessment Matrix .................................................................... 9 ESPON 2020 i Abbreviations ERDF European Regional Development Fund FI Finacial Instruments GVA Gross Value Added ICT Information and Communication Technology IT Information Technology NUTS Nomenclature of Territorial Units for Statistics SEK Swedish Kronor SME Small and medium-sized enterprises SWOT Strengths, Weaknesses, Opportunities, Threats ESPON 2020 ii Abstract The regional venture capital funds were first implemented under the ERDF programmes in Sweden during the 2000-06 programme period, and the Mellersta Norrland region was the location of one of the first of the regional funds to be launched. The main reason for the establishment of the co-investment funds, operating pari passu to strengthen the availability of private capital, was to reduce the capital-equity gap in the region caused by an imbalance between the private financial resources available and the demand by SMEs for funding and support. Twelve regional venture capital funds, managed by public sector agencies, now cover the entire country. In Mellersta Norrland, there are two venture capital funds co- financed by ERDF. The combined assets of the two public co-investment funds are €33 million, and of the €73 million invested in SMEs in the region, €45 million have been attracted from private co-investors. The funds set up in Mellersta Norrland have had diverse and substantive impact on Mellersta Norrland – a remote region where the availability and utilisation of private risk capital have traditionally been sparse. The co-investment funds contribute to a more diversified economy by supporting sectors that have few alternative sources of funding, and to strengthening the local supply of private capital by attracting private-sector partners that would not otherwise have invested. Final evaluations have reported that there are positive signs that the funds’ interventions have led to increased number of employees among portfolio businesses and have improved the regional infrastructure for entrepreneurial financing. The co-investment funds have also promoted increased awareness and understanding about risk capital investment in the region, informing both investors and businesses previously unaware of the opportunities associated with risk finance. Thereby the funds have contributed significantly to the regional economic ecosystem, both on the demand side by increasing the awareness and interest for risk capital among early-stage businesses in a range of sectors, and on the supply side by supporting local private investors with guidance and networking support as well as providing them with a co-financing platform that opens up previously unattainable investment opportunities. ESPON 2020 1 1 Background 1.1 Economic and regional context Mellersta Norrland (Middle Norrland) is one of the most sparsely populated regions in Sweden and the EU, with 4.8 inhabitants/km² and a 2016 population of only 374,245 (Regional Innovation Scoreboard, 2017). Regional unemployment stood at 6.8 percent in 2016, slightly below the national average and below the EU 28 average. The region’s GDP per capita in 2015 (€30,600 PPS) was below the national average but above the EU 28 average. Mellersta Norrland is a NUTS 2 region made up of two relatively independent NUTS 3 regions, the county of Västernorrland and the county of Jämtland. The region is predominantly rural (forests cover about 67 percent of the area and the percentage of GVA from agriculture, forestry and energy is well above the national average) but the economy is dominated by heavy process industries. 1.2 Summary background to the FI The regional venture capital funds in Sweden, built around equity financial instruments co- funded with the ERDF, are well-established, having been in operation over several programme periods. Mellersta Norrland was the location of one of the first of the regional funds to be launched. The regional venture capital funds were first implemented under the ERDF programmes in Sweden during the 2000-06 programme period. Three pilot partnership funds inspired by the Scottish Co-Investment Fund were launched in 2005, in the then Objective 2 programme areas of Västsverige, Gotland and Mellersta Norrland (Michie and Wishlade 2011). 1.3 Scope and objectives of the FI The main reason for establishing the funds was to reduce the capital-equity gap in the region caused by an imbalance between